The Directorate General of Taxes (DGT) of Spain has issued the Binding Consultation V107-23 on February 1, 2023, clarifying that non-resident companies in Spain that own at least 50% of their assets in real estate located in Spanish territory are subject to Wealth Tax (IP).
This pronouncement comes in response to an inquiry from a German resident who holds representative values of participation in the equity of a German collective company, whose sole asset is a property located in Spain.
The DGT has confirmed that, in accordance with the Wealth Tax Law (LIP) and the Convention to avoid double taxation between Spain and Germany, the holder of the shares must pay IP as a passive subject by real obligation, despite his residence in Germany.
In addition, the DGT has clarified that the taxable base of the IP for these non-resident companies will not only include the properties located in Spain but also the value of all assets of the company, even those not located in Spanish territory.
This binding consultation is crucial as it sets an important precedent in the interpretation of the LIP regulations and the Convention to avoid double taxation, emphasizing the tax liability of non-resident companies in Spain owning real estate in Spanish territory. That is, with this modification, confirmed by the DGT, the interposition of a non-resident legal entity will no longer be able to evade the Wealth Tax (IP).
It should be highlighted that this interpretation will already be applicable to the 2022 financial year, whose declaration deadline expires on June 30 (for IP) and July 31 (Solidarity Tax on Large Fortunes, ISGF).
Glezco, with you
At Glezco Asesores y Consultores we have an expert team in taxation through our Tax & Legal Department that is at your disposal for any additional clarification on this matter.